Quote-based competition and trade execution costs in NYSE-listed stocks

Research output: Contribution to journalArticlepeer-review

75 Scopus citations


This study examines quotations, order routing, and trade execution costs for seven markets that compete for orders in large-capitalization NYSE-listed stocks. The competitiveness of quote updates from each market varies with measures of the profitability of attracting additional order and with volatility and inventory measures. The probability of a trade executing on each market increases when the market posts competitive quotes. Execution costs for non-NYSE trades when the local market posts competitive (non-competitive) quotes are virtually the same (substantially exceed) costs for matched NYSE trades. Collectively, these results imply a significant degree of quote-based competition for order flow and are consistent with off-NYSE liquidity providers using competitive quotations to signal when they are prepared to give better-than-normal trade executions.

Original languageEnglish (US)
Pages (from-to)385-422
Number of pages38
JournalJournal of Financial Economics
Issue number3
StatePublished - Dec 1 2003
Externally publishedYes


  • Competition for order flow
  • Quotation strategies
  • Trading costs

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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